Dan Pink on Why Financial Rewards Suck for Motivating Performance

Dan Pink makes a compelling case in his Ted Talk that financial rewards undermine performance in tasks that require creativity and complex problem-solving.  As he says in the talk, this strong evidence about the negative effects of financial rewards runs counter to the assumptions embedded in nearly all major economic theory.   As other research by psychologists on confirmation or "my side"  bias shows, we human-beings have a tough time hearing and believing evidence that runs counter to our beliefs.

P.S. Sally, thanks for telling me about this research.

Comments

[jik]

Alfie Kohn's paper to which you referred is just a very long-winded version of Dan Pink's TED Talk. Or perhaps I should say, more accurately, that Pink's talk is a short version of Kohn's paper. I find Kohn's paper no more convincing than I found Pink's talk.

As I noted in my previous comments, I found all of the studies Pink cites to be obviously and fatally flawed for the purpose of determining true, useful answers to the questions we're discussing. I haven't looked at all the research Kohn cites, but if it's anything like the research Pink cites, then it's just more research whose assumptions and methodologies do not accurately reflect the real-world conditions in which I've been working for over two decades.

People like Kohn and Pink seem to want the world of motivation to be absolute -- either financial incentives motivate or they don't, and there's no third possibility. Well, my real-world experience tells me that there *is* a third possibility, to whit: there are many badly designed incentive programs that have exactly the problems that they describe, but there are also well-designed incentive programs at well-managed companies which achieve their desired effect.

[Dman]

Correction: My comment was in response to jik's comment, not PerGynt's. Apologies.

[Dman]

In response to PerGynt's comment that "properly designed performance incentives can enhance said intrinsic motivation", I urge you to please read Kohn's work (either the book or http://www.alfiekohn.org/managing/cbdmamam.htm). You'll find that such incentives interfere with intrinsic motivation.

[PerGynt]

I have been subject to many financial incentives for my work, and I noticed that it didn't improve the quality of my work. It did prove to me that the company I worked for was interested in keeping me in my position, but other things would have worked better. I never felt an actual part of the company, and I didn't feel any kinship with the entrenched management. In fact I was keenly aware of the social distance between myself and my supervisors. Money alone wouldn't do it, and doesn't often seem to be an effective way to motivate creative people, without more.

[jik]

I totally agree that "The only true form of motivation is intrinsic motivation."

My argument is that when people are already intrinsically motivated, properly designed performance incentives can enhance said intrinsic motivation rather than dampening it.

Anecdotally, I love my job, enjoy coming to work every day, and don't feel at all discouraged or demotivated by the performance incentives offered by my employer. Rather, the fact that my employer offers fair performance incentives is one of the reasons *why* I love my job and enjoy coming to work every day.

[CareerAnnie]

Read Alfie Kohn. His work in the late 80's and early 90's on competition, incentives, and reward systems was really excellent. His book, "No Contest," changed my way of thinking, and his 1993 book, "Punished By Reward," makes a pretty convincing case for the problems associated with performance incentives.

It's pretty straight-forward: The only true form of motivation is intrinsic motivation. Everything else will produce sub-standard results.

[jik]

One more thing with Pink's talk that I forgot to mention... Frankly, his Encarta vs. Wikipedia example is just stupid.

One big reason why Encarta failed was because the Web was not yet ready for an on-line encyclopedia.

Another reason is because Microsoft tried to charge money for Encarta, whereas Wikipedia is free.

I'd venture to say that Malcolm Gladwell would also have a thing or two to say about how Wikipedia managed to reach a tipping point when Encarta never did, and it has nothing to do with whether the people working on Encarta had enough autonomy, mastery or purpose.

But the biggest reason of all is that no matter how many good people and good managers Microsoft hired to work on Encarta, the number of people on the project was several orders of magnitude smaller than the number of people who work on Wikipedia on a regular basis. The issue of scale simply dwarfs everything else.

[jik]

I did not find Dan Pink’s talk persuasive.

All of the studies he cited as proof for his basic assertion are flawed in two major ways:

1) They extrapolate from behavior that takes place over an extremely short period of time (the subjects of these studies performed tasks that took minutes or at most hours) into a realm where behavior takes place over a much longer period of time – performance incentives are usually based on months or even years of performance. Anyone with even a modicum of common sense will recognize that people react differently when the time scale is so drastically different, if for no other reason than because of the panic factor. That is, I don’t sit at work every day worrying that if I don’t do just the right thing for every moment of the day, my bonus at the end of the year is going to be smaller. The pressure and panic which clouded the minds of the subjects of these studies simply do not apply in many (most?) real-world work situations.

2) Employees whose base compensation is fair, who know that it is, and who have their heads screwed on straight, view performance incentives as just what they are, an added bonus, a special treat, something which they appreciate when it comes but which is not something they’re “entitled to.” None of the studies cited by Pink took this into account, because none of the subjects were compensated well just for participating in the study. When employees are paid well for their work, performance incentives are cast in an entirely different light. At most, the studies cited by Fink may prove that poorly designed pay structures, in which employees’ compensation is unfair without the incentives, discourage creativity. They certainly do not prove that all performance incentive structures are flawed, as he asserts.

I also found Pink’s radical new paradigm – autonomy, mastery and purpose – unconvincing. Admittedly, I’ve never worked anywhere with formal “FedEx Days” or “20% Time” policies or in a formal ROWE. However, I can tell you for a fact that jobs where employees are given substantial autonomy, mastery and purpose do exist, because I’ve worked in quite a few of them over the past twenty years.

There are plenty of companies with lousy incentive structures that demotivate employees and which do not give their employees the autonomy, mastery, and purpose that will bring out their best work. No one who has read Dilbert for any period of time can doubt that such companies exist. But it is erroneous to conclude from the existence of such companies that incentive structures are intrinsically flawed or that autonomy, mastery and purpose are radical management ideas, and the studies Pink cited certainly don’t prove any of this.

[Bob Sutton]

John,

I would argue it is simple insight, but far from trivial. The assumption that economic incentives are the primary motivator of human behavior, and getting them right is the key to getting the behavior you want, is so strongly believed that it is rarely even questioned. Look, for example,at the debate about teacher performance, politicians on both sides of the aisle assume that linking students test scores to teacher bonuses and pay will increase test scores -- a proposition that has proven very hard to support. I would argue it is the opposite of trivial,it is so simple and so ingrained that it isn't even questioned.

[John Jenkins]

I am curious why you think this runs contrary to major economic theories (something you've said more than once).

I don't think any economist would deny that there are non-monetary rewards that can be more effective than monetary ones. You'll even find that research in some pop economics books (The Logic of Life, for one). It's a trivial insight. The trick is in identifying the right incentives, not in saying that money is the wrong one.